Alcoa (AA) 'Beat' The Estimates

Yeah 'they' beat the estimates: Alcoa beats estimates in Q3

• NEW YORK: Alcoa Inc’s third-quarter profit beat Wall Street estimates and the largest US aluminum producer increased its outlook for global aluminum demand, sending its shares up more than 3%.
  
  Alcoa raised its 2010 global aluminum consumption growth forecast to 13% from 12%, noting growing demand from countries such as China, Brazil, India and Russia.
  
  In its third-quarter earnings release, Alcoa said net income was US$61mil, or 6 US cents per share, compared with US$77mil, or 8 US cents per share, in the same quarter last year, citing a drop in the price of aluminum and a weaker dollar. — Reuters

Beat estimates eh?

Previous year same quarter, AA made 8 cents per share.

Last quarter in July 2010? A Look At Alcoa's Earnings: How Good Was It?

• Alcoa kicked off the second-quarter earnings season after the market close Monday and said that its profits came in at 13 cents a share, which beat analyst estimates by a penny. Revenue rose to US$5.2 billion, also above estimates

Yeah in Q2, Alcoa did 13 cents!

In short, 2009 Q3, AA did 8 sen. 2010 Q2 AA did 13 sen. 2010 Q3 AA did 6 sen.

So how good is it when the media and the street boldly declares the fact that Alcoa beat the estimates?

Doncha just love Wall Strreeeeet!

huhu!

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A Look At Alcoa's Earnings: How Good Was It?

So the market rose again... 6 in a row dudes and dudettes!

• NEW YORK (CNNMoney.com) -- Stocks surged Tuesday as investors welcomed Alcoa's better-than-expected profit report and a well-received auction of Greek debt that lifted global markets and strengthened the euro..... here

So how good was Alcoa's earnings? :D

• Alcoa kicked off the second-quarter earnings season after the market close Monday and said that its profits came in at 13 cents a share, which beat analyst estimates by a penny. Revenue rose to US$5.2 billion, also above estimates.
  Alcoa also said global consumption of aluminum will grow this year by more than it had forecast just three months ago and its shares ran ahead 13 cents to US$11. (source: here )

Reality?

• "Alcoa's earnings were very, very decent, definitely beat expectations although expectations have been dramatically lowered over the previous couple of months," said Kathryn Delgreco, investment adviser at TD Waterhouse (source: here )

LOL! Quote: "although expectations have been dramatically lowered over the previous couple of months"!

Needless to say if earnings estimates were lowered, the company (or AA here) would sure to beat the estimates!

LOL! Talk about lowering the bar, eh? :P

The following is taken from Alcoa's website..

• NEW YORK--(BUSINESS WIRE)--Alcoa (NYSE: AA) today announced second quarter 2010 income from continuing operations of $137 million or $0.13 per share compared with a first quarter 2010 loss from continuing operations of $194 million, or a loss of $0.19 per share. First quarter 2010 results included restructuring and special charges of $295 million, or $0.29 per share. The second quarter of 2009 showed a loss from continuing operations of $312 million, or $0.32 per share including restructuring charges.
  
  Earnings for the second quarter improved $331 million sequentially as stronger volumes, productivity improvements, favorable currency and lower energy costs more than offset slightly lower average realized metal prices which declined $22 a metric ton, to an average of $2,309 a ton in the quarter.
  
  The second quarter 2010 results reflect the impact of restructuring including job reductions and special items such as costs associated with the recently completed United Steelworkers contract negotiations, offset by non-cash, mark-to-market benefits on derivatives in several power contracts as well as a net discrete tax benefit. Taken together these items had a net unfavorable impact of $2 million in the quarter. First quarter 2010 results included restructuring and special charges of $295 million or $0.29 per share.
  
  Revenues for the quarter were $5.2 billion, a six percent increase from the first quarter of 2010 driven by a four percent increase in aluminum shipments and a one percent increase in third-party prices for alumina, partially offset by a one percent decrease in realized prices for aluminum. In many markets we saw strong revenue growth from the previous quarter with packaging (+17%), commercial transportation (+10%), building and construction (+9%), distribution (+5%), industrial gas turbines (+5%) and aerospace (+5%) realizing gains. Revenues increased 22 percent from $4.2 billion in the second quarter of 2009.
  
  “We improved profits and revenues and maintained our solid cash position,” said Klaus Kleinfeld, Alcoa Chairman and CEO. “The top and bottom line growth was driven by higher volumes from stronger end markets and continued gains from our productivity programs. Based on this improved end-market demand, we are raising our projection for aluminum consumption from 10 percent to 12 percent this year.
  
  “Prospects for Alcoa and aluminum continue to be excellent,” Kleinfeld said. “Aluminum is traditionally a backbone of growing economies and is penetrating new applications every day. Alcoa has enviable positions in bauxite, alumina and aluminum and our investments will move us further down the cost curve. Meanwhile, our mid- and downstream businesses continue to improve margins.” (source: here )

Going Gaga over 137 million net income?

Just for a matter of comparison, take the 'better' years in 2007 and 2006. Yeah let's compare a quarterly earnings of 137 million versus what Alcoa was making in 2007.

From Google: http://www.google.com/finance?q=NYSE:AA&fstype=ii

So in 2007 AA was earning some 2.5 Billion per year. In 2006 AA was earning 2.2 Billion per year.

This so-called great quarter, AA only made 137 million. I wonder how much AA could possibly make for its fy2010. ( Where's that calamari??)

( LOL! I know.. I could be beaten sen-less or is it senseless :P ... cos... the pros would call AA the 'perfect' turnaround stock which reflects the global turnaround economy. :P )

ps: pick your poison.

6 months

5 years

And last but not least the issue about Greece as per CNN article. Quote: "well-received auction of Greek debt that lifted global markets and strengthened the euro"

A well-received auction??

Waka! Waka! :P

On ZH: After Chickening Out Of 1 Year Bills, Greece Sells €1.625 Bn 6 Month Bills To Yield 4.65%

• Greece, which had previously decided against auctioning off 1 Year Bills for fear of lack of interest, managed to place €1.625 in 6 month bills in which local institutions purchased the bulk of the auction as foreign interest was muted. According to the PDMA who apparently still tracks the charade of ECB bailed out Greek banks recycling ECB money to then buy sovereign debt, the auction produced a yield of 4.65 percent for 26-week T-bills, up from 4.55 percent in a previous April 13 auction. The bid-cover ratio was 3.64 versus 7.67 in the previous auction.

Hmm... a well received auction. LOL! :D

Don't you love the stock markets!

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Alcoa Earnings Review

On CNBC: Alcoa Shares Jump as Results Top Expectations

• Alcoa reported another quarterly loss Wednesday as aluminum demand remained weak and the price of the metal was depressed, but the shortfall was narrower than analysts expected. The company's sales exceeded forecasts as well.
  
  Shares of the aluminum giant jumped in extended trading Wednesday....

Beat expectations?

And for the record this is Alcoa's third quarterly losses in a row.

And the shares jumped in extended trading.

Also from same CNBC article.

• The aluminum giant reported a loss of 26 cents a share in the second quarter, excluding one-time charges, compared with earnings of 66 cents a share in the same period last year.
  
  The company reported a topline of $4.2 billion, compared with sales of $7.62 billion this time last year. The most recent results were hurt as metal prices and the auto industry have slumped and global demand has fallen during the economic downturn.
• In response to the tough times, Alcoa—the first member of the Dow Jones Industrial Average to report—has cut thousands of jobs, slashed its dividend, trimmed spending and raised $1.3 billion to help it through the slowdown.

No monetary figure on how much Alcoa lost?

On Finance.Yahoo.com Alcoa posts 2Q loss of $454M on weak demand

Some passages from that article.

• Alcoa Inc. unofficially opened the earnings season by posting a narrower-than-expected loss of $454 million, citing continued weak prices and demand for its aluminum products amid the global
  recession.
• Alcoa executives credited the results, which exceeded Wall Street projections and moved its stock higher in after-hours trading, to the company's efforts to slash costs and conserve cash in recent months. They pointed to signs that some aluminum markets may be stabilizing, but reiterated an earlier estimate that the aluminum industry will shrink 7 percent this year.
  
  It was Alcoa's third straight quarterly loss and fresh evidence of slumping orders from key customers in the aerospace, automotive and construction industries. Aluminum makers have struggled since last year with sharply lower orders for the metal used in products ranging from beer cans to jumbo jets.
  
  The weaker demand has driven up stockpiles and depressed prices of the metal, and many aluminum makers have responded by curbing production. Analysts say demand is picking up, but excess supplies will keep prices relatively low in the months ahead.

' .... weaker demand has driven up stockpiles...' ? Hmmmm....

Now on wsj article Alcoa's Earnings

• Hopes for an economic rebound have pushed aluminum prices up 24% in the past few months, while Alcoa shares have rallied roughly 80%.
• Still, much of the recent demand for aluminum and other metals has been due to China restocking industrial supplies in the first half of the year. That process may be winding down, and commodities might soon need longer-lasting sources of demand to keep climbing higher.

Restocking industrial supplies? Or as Andy Xie Calls It Speculative Inventory And NOT Commodity Stockpiling!

Now I just remembered reading a blog entry yesterday from Macro Man called Remarkable!. I was 'amazed' by the chart posted.

• So after China, a country with a considerable aluminum manufacturing capacity running well below max capacity, starts a fairly-clearly-impossible-to-maintain run of aluminum imports like this:
  
  

Would one call the above chart as plain restocking? Or perhaps Andy Xie has been so spot on?

Anyway the wsj article continues...

• Even then, aluminum's long-term prospects are among the rockiest of all commodities. UBS analysts recently raised their price forecasts for a wide range of metals, from lead to gold. The only metal for which UBS cut its estimates for both 2010 and 2011 was aluminum.
  
  The big problem for aluminum is that there is far too much of it. Rising inventories have been a problem for most commodities, but especially for aluminum, which has more global production capacity than most any other metal. That production hasn't been cut nearly enough to match declining demand. Deutsche Bank analysts expect production of 36.7 million metric tons this year, compared with demand of about 35 million tons. Demand and supply are more closely in balance for copper, zinc and other metals.
  
  Total aluminum inventories were up 165% from a year ago in May to 17 weeks' worth of demand, according to Bank of America Securities-Merrill Lynch analysts, compared with a long-term average of 7.5 weeks.
  
  The world will need to make a lot of cars and beer cans to close that gap. Until then, aluminum might lag behind other commodities.

Aluminium inventories up 165%????

LOL!

Inventory bubble eh?

Anyway back to Alcoa.

Let's see what we have...

1. The stock had already rallied some 80% since the lows....
2. The 'better than expected earnings' should really read 'LOST LESS MONEY than expected.
3. Company trimming dividends
4. Shares used to between 30.00 to 40.00. It's now still less than 10.00. Value for money?

Chart on Alcoa.

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